Suppose the Federal Government Allows Labor Unions to Act as the Sole

Multiple Choice

Suppose the federal government allows labor unions to act as the sole seller in labor markets, but the government collects a $1 per hour fee to cover unemployment insurance for each union worker. Assuming this fee is not so large that it forces the unions to disband, what is the impact of this fee on the equilibrium wage and employment level in the monopolized labor market?

A) After-tax wages and employment decline.
B) After-tax wages increase and employment declines.
C) Employment increases and after-tax wages decline.
D) No change in after-tax wages or employment levels.